LIBRARY OF CONGRESS, 

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UNITED STATES OP AMERICA. 



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USURY: 



OR 



INTEREST, PREMIUM AND DISCOUNT. 



A LECTURE 



DELIVERED 



BEFORE THE STUDENTS 



CRITTENDEN'S 



WhdalphiH ^[ammtrtial O^^olhg^, 



BY 



y 



S. H. CRITTENDEN, 

A-ttomey at 'L^a.-wv, 
CONSULTING ACCOUNTANT AND PRINCIPAL. 




PHILADELPHIA: 

RINGWALT & BROWN, STEAM-POWER BOOK AND JOB PRINTERS^ 

Nos. Ill & 113 SOUTH FOURTH STREET. 

1863. 




HB 6 



[No. 5.] 



USURY: 

OR 

Jntcrcfit, fn^mium mil iiscount. 

A LECTURE* 

DELIVERED BEFORE THE STUDENTS OF 

CRITTENDEN'S PHILADELPHIA COMMERCIAL COLLEGE, 

BY 

S. H. CRITTENDEN, Attorney at Law, 



Our subject to day is Usury. 

We will first speak of this subject in its direct relation to 
Book-Keeping. That is, as to its treatment under different 
forms, on the Ledger, since this is in reality the phase in ^Yhich 
it is of most importance for us to consider it. Afterwards we 
will glance at the matter in the view of utility, economy and 
legality. 

The ledger titles which embrace this subject, are Interest, 
Discount and Premium. These are all often, and indeed 
generally, embodied in one account, headed Interest, yet they 
are radically different divisions of the account, both in 
their nature and manner of computation ; although all tending 
to one point, when placed upon the merchant's books, viz : to 
add to his total gains or losses. 

*Entere(i according to Act of Congress, in the year 1863, by S. H. Crittenden, in the Clerk's 
OfHce of the District Court, for the Eastern District of Pennsylvania. 

(1) 



l^jt^ 



McCullock's Commercial Dictionary has the following defi- 
nitions of Interest and Discount : 

'■'■Interest, is the sum paid by the borrower of a sum of 
money, or of any sort of valuable produce, to the lender, for its 
use." 

'■^Discount, is an allowance made on account of an immediate 
advance of a sum of money, not due till some future period." 

Premium, according to Webster's Dictionary, is "a bounty, 
or something offered or given for the loan of money, usually a 
sum beyond the interest." 

These definitions, though not full, will yet serve as a founda- 
tion on which to construct an explanation that may make these 
terms more easy of comprehension. You perceive that in order 
to apply the definition of Interest, which I have quoted, we 
must look upon every person who is indebted to another, as a 
borrower ; that is, as having in his possession, certain property 
which belongs of right to that other person ; and for retaining 
the use of which he must pay him an equivalent. If you 
consider in this light all transactions in which Interest is 
demanded and paid, this portion of the subject will perhaps be 
sufficiently plain without additional comment. 

It is in relation to the second division of the account that 
most confusion usually arises. There are not less than three 
distinct transactions, which are all included in the usual 
language of business men, under the single term Discount. 
They are : 

1st. When a deduction is made for payment of a note or 
account before due ; 2d. When a per centage is taken off from 
a sale, in consideration of ready money ; 3d. When money is 
remitted from one country to another, at an additional expense 
or at a loss. 

If at an expense, it is sometimes called Premium. 

For illustration, under the 1st division ; suppose A holds a 
note against B for $500 due in four months, and B comes 
to-day and profilers payment ; the custom is, for A to deduct 
the interest on |500 for four months, from the face of the note ; 
and to accept the balance as payment in full : thus considering 



3 

the use of the remainder of the amount, suflBcient to compensate 
for the deficiency in the payment of the face of the bill. But 
this is manifestly incorrect, if Ave take the existing law of this, 
State, which declares the value of the money to he but six per 
cent, per annum, to be founded on just principles. For the 
interest on the remainder of the note, after deducting the 
interest on the face of the note therefrom, is not sufficient at 
the same rate per cent, to make up the original sum. So that 
B, by paying thus in advance, secures a larger rate of interest 
than is lawful. Yet this is the usage, and it is an old adage, 
and well established, that usage makes laiv. This is Avhat is 
termed Bank Discount. True Discount, is such a sum, as, 
when deducted from the original debt, the interest on the 
balance will just equal the amount deducted. The method of 
ascertaining this is by proportion, or, as it is called in arithme- 
tics, rule of tliree. Thus we would say, as the amount of f 100. 
and interest for the given time and rate is to the interest on 
$100. for the same time and rate, so is the total sum to the 
amount of discount to be deducted therefrom. Stated thus, — 
102.00 : 2.00 : : 500.00 : the answer. 

2d. If C sells goods to D and within a certain limited time, 
usually among the jobbing trade of our city 30 days after pur- 
chase, D pays for them in cash, usage again allows him a 
deduction from the face of the invoice of say 5 per cent. 
This is also called Discount, but it is not properly such. Eor 
it is only a deduction of such a proportion or per centage of 
the bill, on fulfillment of certain conditions ; Avhile Discount is 
reckoned with reference to time to run, as well as rate per cent. ; 
in fine. Discount is simple Interest paid beforehand. 

3d. The term Discount is also applied to that sum which is 
advanced beyond or deducted from the amount of a debt, 
in remitting money from one country to another. 

Thus, if I wish to remit a sum of money to any foreign 
country, it is needful for me to ascertain what is the difference 
of valuation at the present time between money of the denomi- 
nations used and ordinarily obtainable here, and those in the 
country to which the remittance is to be made. This valuation 



I suppose you all understand is a merely arbitrary one, fixed 
at the will of the supreme power in any State, and varying 
according to circumstances and the ideas of the law makers. If, 
for instance, owing to the different amounts of alloy used in 
coining pieces of corresponding value in different countries, 
there is say 5 per cent, more precious metal in the coin of that 
country to which I wish to remit than in that of our own 
country, I must necessarily pay this difference in addition to 
the original sum, in order to render the account of my cor- 
respondent good according to the valuation in his country. If 
on the other hand the intrinsic value of our coin is 5 per cent, 
the greater, then one hundred dollars of our coin will pay one 
hundred and five dollars of the other. 

The proper term for this is Exchange, and if this name were 
universally adopted, there would be far less of confusion in the 
ideas associated with such transactions, in the minds of most 
persons. 

We will now turn to a consideration of the peculiar nature of 
Interest, or more properly Usury, and the reasons assigned for 
a limitation of its rate by law. Formerly, the amount received 
in payment for the loan of capital, was denominated Usury ; that 
is to say, rent for its use and enjoyment. 

This is the correct term, for Interest is only the rent, or price 
paid for the enjoyment of an object of value. 

But this word has acquired an odious meaning, and is now 
understood to express an illegal and oppressive rate of interest 
only, the milder but less expressive term being substituted by 
common usage. 

In earlier times, before the advantage and utility of a reserve 
capital was known and appreciated, the demand of a rent for 
its use by lenders, was looked upon as an abuse of power, and 
an oppression towards the needy. And, more still, it seems 
from the accounts handed down to us by the writers of those 
days, that even that frugality, without which capital cannot be 
amassed, was looked upon as parsimony, and deemed a public 
injury, by the populace, who looked upon all sums not spent by 
the great proprietors, as lost to themselves.' They could not 



5 

comprehend that money laid by, as a capital for some profitable 
employment, was to all intents equally spent ; and that to in a 
way far more beneficial to the poor. For a laboring man is 
never sure of earning a subsistence save where there is a capi- 
tal in reserve for him to work upon. This inability to understand 
its use gave rise to strong- prejudice against rich individuals, who 
do not spend their whole income as it comes m ; such a feeling 
still exists to a great extent : formerly it was universal. Lenders 
themselves were infected by it, and were so much ashamed of 
the part they were acting as to employ the most disreputable 
agents in the collection of profits perfectly just, and highly 
useful to society. 

There have been from time to time various species and modifi- 
cations of statutes, and enactments for the promotion of public 
liberty, and the advancement of happiness, both private and 
public. 

Yet, though these ordinances have been provided in all good 
faith, by the legislators, it is evident to every person who 
observes closely, and compares causes and effects, that oftentimes 
their operation is inefficient for the end aimed at ; and often 
directly the reverse in effect from the original intention of their 
makers. Especially, it seems to me, is this the case in the 
matter of those laws relating to Usury. 

There exists almost universally, a sort of hereditary prejudice 
against the very name of Usury. Almost every one will plead 
guilty to such feelings as these : " Usury is a bad thing, and as 
such ought to be prevented ; Usurers are a bad sort of men, a 
very bad sort of men, and as such ought to be punished and 
suppressed." Now, it is not wonderful that men fall into such 
opinions, and become firmly grounded in them, when they hear 
them handed down and repeated by those to whom they are in 
the habit of looking with confidence for correct ideas. 

For it cannot be expected that the mass of mankind should 
find leisure, even had they the ability, to examine into the grounds 
of a hundreth part of the rules and maxims which they find 
themselves compelled to follow and observe. The fact is, that 
wherever it has been attempted to limit the rate of Interest, or 



• 6 

to abolish it altogether by law, there the practice of Usury has 
uniformly revived. And, as might naturally be expected, the 
more severe the penalties, and the more rigid their execution, 
the higher the rate of interest was sure to rise. Because the 
risk being so much greater, the lender must needs have a larger 
premium of insurance to tempt him to incur it. It is a matter 
of history, that at Rome, during the continuance of the republi- 
can form of government the rates of interest were enormous. 
The simple and plain reason of this was, that the debtors who 
were always plebeians, were continually threatening their patri- 
cian creditors. 

So also, in those Christian countries where Interest on loans 
has been forbidden, or what is equivalent, where it has been 
placed by laAV at so low a point as Avould not suffice to pay the 
risk of loss to a lender, the practice has been made over almost 
entirely to the Jews ; while at the same time so great has been 
the extortion, oppression, and humilation to which this people 
were exposed that nothing short of a very heavy rate of Interest 
could indemnify them for such risks and repeated losses. 

Thus in any case the ratio of the Premium of insurance, which 
frequently forms the greater portion of Avhat is called Interest, 
will depend upon the degree of security presented to the lender. 
The greater the risk, the higher will be the rate of Interest. 
When we detach from the rate of interest all that is paid as a 
security to the lender against the risk of partial or total loss of 
his capital, it remains to consider that part which is purely and 
simply Interest : that is to say, rent paid for the use of capital. 

This is the point upon which many wise legislators have 
endeavored to lay down laws as infallible guides, and many 
learned economists have advocated such restrictive enactments, 
as even to this day obtain in most civilized countries. The 
Romans seem, according to Cato, to have considered an Usurer, 
as worse than a thief. For, says he, " Our Ancestors, enacted 
in their laws, that a thief should be condemned to pay double, 
but an Usurer, quadruple.''' 

Even that most learned commentator 'on law. Sir Henry 
Blackstone, pronounces that a legal limit ought to be jjlaced to 
this branch of trade. 



I will quote from Blackstone, on this subject. He says, when 
speaking of the general points in the contract of hiring and 
borrowing : [2 Com., p. 454,] " There is one species of this 
price or reward, the most usual of any, but concerning which 
many good and learned men have in former times very much 
perplexed themselves, and other people, by raising doubts about 
its legality inforo eonscientie. 

" That is, when money is lent on a contract, to receive not only 
the principal sum again, but also an increase by way of compen- 
sation for the use ; which is generally called Interest by those 
who think it lawful, and Usury by those who do not so ; for those 
enemies to Interest, in general, make no distinction between that 
and Usury, holding any increase of money to be indefensibly 
usurious. And this they ground, as well on the prohibition of 
it by the law of Moses among the Jews, as also upon what 
is said to be laid down by Aristotle, that money is naturally 
barren, and to make it breed money is preposterous and a 
perversion of the end of its institution, which was only to serve 
the purposes of Exchange, and not of increase. " Hence the 
school divines have branded the practice of taking Interest as 
being contrary to the divine law, both natural and revealed : 
and the canon law has proscribed the taking any, the least, 
increase for the loan of money, as a mortal sin. 

" But in ansAver to this it hath been observed, that the Mosaical 
precept was clearly a political, and not a moral precept. It 
only prohibited the Jews from taking Usury from their brethren, 
the Jews : but in express words, permitted them to take it of a 
stranger ; which proves that the taking of moderate Usury, or 
a reward for the use, for so the word signifies, is not malum in se, 
(a sin in itself considered,) since it was allowed where any but 
an Israelite was concerned. And as to the reason given by 
Aristotle, and deduced from the natural barrenness of money, 
the same may with equal force be alleged of houses, which never 
breed houses ; and twenty other things, which nobody doubts it 
is lawful to make profit of, by letting them to hire. 

" And though money was originally used only for the purposes 
of exchange, yet the laws of any State may be Avell justified 



in permitting it to be turned to the purposes of profit, if the 
convenience of society, (the great end for which money was 
invented,) shall require it. And that the allowance of moderate 
Interest tends greatly to the benefit of 'the public, especially in 
a trading country, will appear from that generally acknowledged 
principle, that commerce cannot subsist without mutual and 
extensive credit. Unless money, therefore, can be borrowed, 
trade cannot be carried on : and if no Premium were allowed 
for the hire of money, few persons would care to lend it ; or, 
at least, the ease of borrowing at a short warning, (which is the 
life of commerce,) would be entirely at an end. 

" And as to any scruples of conscience, since all other con- 
veniences of life may be either bought or hired, there seems to 
be no greater oppression in taking a recompense or price for 
the hire of this, than of any other convenience." 

For the taking of such recompense we have moreover, the 
very highest authority in the words of our Saviour, who, in the 
parable of the talents, censures the slothful servant in these 
words : " Thou wicked and slothful servant, thou knewest that • 
I reap where I sowed not, and gather where I have not strewed. 
Thou oughtest therefore to have put my money at the exchan- 
gers, and then at my coming I should have received mine own 
with Usury.'' 

Dr. Adam Smith, in his work entitled " Wealth of Nations," 
[Vol. 1, p. 429,] published in 1776, and which has been long a 
text book for political economists, says : " A capital lent at 
Interest may, in this manner, be considered as an assignment 
from the lender to the borrower of a certain considerable portion " 
of the annual produce ; upon condition that the borrower in 
return shall, during the continuance of the loan, annually assign , 
to the lender a smaller portion, called the Interest ; and at the 
end of it a portion equally considerable with that which had 
originally been assigned to him, called the repayment. Though 
money, either coin, or paper, serves generally as the deed of 
assignment, both to the smaller and to the more considerable 
portion, it is of itself altogether different from what is assigned 
by it." And again: "As such capitals are commonly lent out, 



9 

and paid back in money, they constitute what is called the 
monied interest." "In some countries the Interest of money 
has been prohibited by law. But as something can everywhere 
be made by the use of money, something ought everywhere to be 
paid for the use of it. This regulation instead of preventing, 
has been found from experience, to increase the evil of Usury ; 
the debtor being obliged to pay, not only for the use of the 
money, but for the risk which his creditor runs by accepting a 
compensation for that use. He is obliged, if one may say so, 
to insure his creditor from the penalties of Usury." 

" In countries where Interest is permitted, the law, in order 
to prevent the extortion of Usury, generally fixes the highest 
rate which can be taken without incurring a penalty. This rate 
ought always to be somewhat above the lowest market price, or 
the price which is commonly paid for the use of money by those 
who can give the most undoubted security." 

' ' If this legal rate should be fixed below the lowest market rate, 
the efiects of this fixation must be nearly the same as those of 
a total prohibition of Interest." 

" The creditor will not lend his money for less than the use of 
it is worth, and the debtor must pay him for the risk which he 
runs by accepting the full value of that use. If it is fixed 
precisely at the lowest market price, it ruins, with honest people, 
who respect the laws of their country, the credit of all those 
who cannot give the very best security, and obliges them to 
have recourse to exorbitant usurers." 

"The legal rate, it is to be observed, though it ought to be 
somewhat above, ought not to be much above the lowest market 
rate. If the legal rate of interest in Great Britain, for example, 
were fixed so high as eight or ten per cent, the greater part of 
the money which was to be lent, would be lent to prodigals and 
projectors, who alone would be willing to give this high rate of 
Interest. Sober people, who will give for the use of money no 
more than a part of what they are likely to make by the use of 
it, would not venture into the competition. A great part of the 
capital of the country, would thus be kept out of the hands 
most likely to make a profitable and advantageous use of it, 



10 

and thrown into those most likely to waste and destroy it. Where 
the legal rate of Interest, on the contrary, is fixed but a very 
little above the lowest market rate, sober people are universally 
preferred as borrowers to prodigals and projectors. The person 
who lends money gets nearly as much Interest from the former, 
as he dare take from the latter, and his money is much safer in 
the hands of the one set of people, than in those of the other. A 
great part of the capital of the country is thus thrown into the 
hands in which it is most likely to be employed with advantage. 
"No law can reduce the common rate of Interest below the 
lowest ordinary market rate at the time when that law is made. 
Notwithstanding the edict of 1766, by which the French king 
attempted to reduce the rate of Interest from five to four per 
cent,, money continued to be lent in France at five per cent. : 
the law being evaded in several different ways." 

Pufiendorf, whose treatise on the "Laws of Nature and of 
Nations," was published in England in 1710, says : " The argu- 
ments which are brought against Usury are easily answered. 
It is urged that the loan of a consumable commodity ought to 
be given gratis, because the loan of all other things is so. But 
I answer that I have the power of granting the use of my goods 
that are not consumable either gratis, or for rent : whereof, the 
one is a loan, the other a letting. So what should hinder me 
from granting the use of my money also, either gratis, or for a 
certain recompense ? When one man borrows to increase his 
wealth, or improve his condition, why should another lend to 
him for nothing ? Nay, 'tis an unreasonable thing, when you 
vastly improve your fortune with my money, not to admit me 
to some share of the gain. For I, in the meantime, am debarred 
from making that advantage which I might have otherwise 
expected, by applying it to my own use. Besides, I have parted 
with something valuable, which ought therefore to be considered : 
for in lieu of my money, I have only an action against your 
person, which cannot be prosecuted without some trouble. It 
may also happen by some accident that the debt may be lost. 
Nay, sometimes the debtor must be courted and caressed, that 
it be not lost. And some borrow on purpose to make their 



11 

creditors dependent on them. As, tlie Marechal de Rochelause, 
when he was taxed by Louis XIII. with taking part with the 
Duke of Mayenne, pleaded in excuse, that he did not follow the 
Duke, but his money : for his debt Avould be in a desperate 
condition if he did not stick close to his debtor. 

" Besides, it is not seldom that we lend to persons who are 
utterly unable to pay ; and therefore some arv3 of the opinion 
that it would be for the advantage of the public, to allow none 
but merchants to take up money at use ; for this would make 
the poor industrious, and force them to frugality, who, some of 
them, are not afraid to pay Interest for money to maintain their 
extravagancies. And monied men, rather than let their money 
lie dead, would either take to merchandise themselves or would 
put out their money to those who do : which would make trade 
flourish to the great benefit of the commonwealth. 

Grotius is of the opinion, "that the legal interest ought to be 
stated, not according to the gains of the borrower, but the loss 
that thereby accrues to the lender : as in buying and selling, 
and other contracts, no regard is had to what the receiver may 
make of the commodity, but what goes away from the seller." 

" And in this case so much goes away as every man in his own 
calling might, and usually does, make of his money ; allowance 
being made for hazards, which in some cases are more, and in 
others less. With this,' I so far agree : that no man can com- 
plain, if his debtor makes a vast and unexpected return of his 
money ; but yet there is no doubt but I may demand higher 
Interest of him that makes a very gainful trade, than I can of 
another who drives a poor one." 

These are the opinions of men learned in the science of 
political economy ; and are entitled to weighty consideration ; 
but it seems to me, they do not, any of them, reach quite far 
enough into the subject. All of them appeared to be fettered 
by the pressure of that same generally recognized opinion to 
which I have before adverted. 

The proposition I am inclined to favor on this much mooted 
point is aptly expressed in the words of Jeremy Bentham. It 
is, " that no man of ripe years, and of sound mind, acting freely, 



12 

and with his eyes open, ought to be hindered, with a view to his 
advantage, from making such a bargain in the way of obtaining 
money, as he thinks fit, nor, (what is a necessary consequence,) 
anybody hindered from supplying him, upon any terms he 
thinks proper to accede to." 

There are but two definitions which can be given to Usury. 
One is, taking a larger rate of Interest than the law allows ; 
this is the legal or, political definition. The other is taking 
more Interest than is usual for other people to give and take ; 
this is the 7noral one. And now, in order that the la^ may 
touch the point, and actually prohibit Usury, it is needful first 
that the law should supercede morals, or conventional custom, 
and fix that point. 

One thing is certain, that antecedently to custom, which has 
grown to be established conventionally, there could not be such 
a thing as Usury. For what rate of interest is more right than 
another ? In one land ten per cent, is the legal and therefore 
(as the advocates of limitation would say) the proper rate ; in 
an another five per cent, is the utmost which the tender con- 
sciences of the legislators will allow. Even in the same country, 
from time to time, the rates are and have been vai-ied as the 
wants of the community, the exigencies of the times, or the 
whims of the legislators prompted. 

It is, then, convenience which has produced whatever there is 
of custom in the matter. "And what, (asks Bentham appropri- 
ately,) is there in custom, to make it so much more deserving of 
observance than convenience, which first gave it birth ? " 

It is convenient for me to give 8 per cent, for money. "No," 
says the law, "you shall not." Why ? "Because it is not con- 
venient for your neighbor to give more than 6 per cent, for 
it." Can anything be more absurd? 

Then again, as to the opprobrious name. No appellation or 
particular stigma of disrepute afiixes to a man who being the 
owner of a house, gets as high a rent for it as he can. Indeed 
this is the common practice with such persons, and nobody is 
ashamed to do so, or professes to do otherwise. Now, why a 
man who possesses money, and takes as much as he can get for 



13 

it, say 8, 10 or 12 per cent, should be loaded witli vile epithets, 
any more than if he had bought a house with it, and then made 
the same profit from renting the house, is more than I can see. 

Another point, in Avhich the good policy of the existing 
restrictive laws upon this subject, seems doubtful, is that they 
operate in only one direction. If it is wrong, and worthy of 
punishment, to tahe more than the fixed maximum of interest 
for the use of monej^, why not make it a penal offence to offer 
less than that amount, as well as to accept more ? 

There are divers reasons given by the advocates of the laws 
restricting the rates of Interest why they are beneficial and 
ought to be enforced. Among these are : that they prevent 
prodigality, and protect the poor and shuple from extortion 
and imposition. 

As to preventing prodigality : does not every one know that 
so long as a person has money, or property of any sort, with 
which it is possible for him to display prodigalit}'', no Usury 
laws will stop him from expending it ; and, that after his prop- 
erty is gone and he has no more to expend, none are more ready 
to promise the largest Interest, providing he can thereby obtain 
additional money to spend ? for what he gets is clear gain, he hav- 
ing nothing to lose. This, it would seem is a hopeless class, 
for whose protection or advantage to legislate. 

Besides prodigals, there are three other classes, to whose bene- 
fit such restrictive laws are supposed by their authors to insure. 
They are the indigent, the rashly enterprising, and the simple. 
That is to say, those whose pecuniary necessities are so pressing, 
as to render them willing to pay an Interest, above the ordinary 
rate, rather than not to have the money ; those who from 
rashness, may be disposed to venture upon the giving such a 
rate without duly considering the consequence ; and those whose 
natural carelessness combined with ignorance would lead them 
to acquiesce in it. 

Let us look at the conditions of these classes a fcAV moments. 
Here is a small trader we will say, whose stock in trade consists 
of only a small amount of property, combined with an, as yet, 
perfectly untarnished reputation for punctuality in payments. 



14 

This last, all who know anything of business, will at once admit 
to be the principal, and most important item of his stock. For 
with such a character, no merchant will refuse to credit him for 
articles needful to carry on his business ; and thus all goes well 
with him. 

But now his carefully cherished credit is in danger. He has 
been disappointed in his expectations of a ready sale for some 
part of his goods, or in obtaining money promised him for a 
debt, and finds himself without the means to promptly meet 
an obligation falling due to-morrow. 

His position is such in the matter of property as not to render 
it worth anybody's while to lend him at the legal rate ; in 
short he cannot raise money to meet this obligation at that 
rate, and must do one of two things — either lose his credit, 
which will ruin utterly his prospects of making a comfortable 
subsistence for his family ; or he must obtain the means of 
saving this cherished treasure intact, by paying somewhat more 
for the use of the money. We can at once see what he, who 
has every motive and means for judging rightly in the matter, 
would decide to be the wisest course, and the one nearest the 
path of rectitude. As a matter of course, if he could obtain 
the money at a low rate, he would not pay the higher one. 
But now the legislator who knows nothing of any of these cir- 
cumstances, but whose heart overflows with prudence, and 
loving kindness for the poor man, steps in, and says : "It signi- 
fies nothing ; you shall not have the money, for it would be 
doing you a mischief to allow you to borrow on such terms." 
There might be worse cruelty, but not easily greater folly. 

Next, in regard to the ignorant and simple, for Avhose protec- 
tion from imposition or fraud, these laws are enacted. First, 
could any degree of simplicity or want of tact be greater or 
more evident than that displayed in such a case as we have 
just spoken of; where a legislator could confine a man under 
such circumstances, to a given rate of Interest ? 

Second, suppose the wisdom of the legislator to be never so 
much greater than that of the individual, no matter how weak 
that may be, how useless is the exertion of it in this case only, 



15 

while there remains so many other occasions Avhere the simplicity 
of the suiferer would make him the victim of injustice, and 
where the legislator cannot interpose to protect him. In every 
day affairs, in the matter of buying and selling, whether with 
money, or on credit, such persons are liable to be overreached ; 
and yet none have thought that for this reason, a le^al price 
ought to be set upon all goods, of whatever description. Nor, 
supposing that even this endless undertaking were accom- 
plished by the legislator, would it avail anything unless he also 
should regulate the exact amount of each article which each 
man should buy. 

When matters arrive at this point, we find the person in the 
position of those for whom the law provides entirely, as not 
being fit to take care of themselves : such are usually denomi- 
nated idiots. 

And now, as we have considered at some length the needless- 
ness and inefficiency of such legislation, let us for a few moments, 
look at some of its evil results. 

We will speak at first of those who are by this means virtually 
prohibited from obtaining money on loans. Consider for a 
moment, what distress and inconvenience it would produce were 
the privilege of borrowing denied to everybody. Just that 
inconvenience is occasioned to those people whose security 
would, if they were allowed to add a little of the rate of Interest, 
be sufficient to obtain the needed funds, but is not sufficient 
for that purpose when such liberty is denied. Thus the misfor- 
tune of not happening to be possessed of that amount of property 
which is considered a sufficient security, is made the ground, 
under such legislation, of inflicting hardships upon a man, which 
those who are so fortunate as to have such security do not suffer. 

The only point of distinction between the two classes, is that 
the necessity of one is greater than that of the other. For 
were this not the case, they would not be willing, as we have 
supposed, to pay more to be rid of it. 

Another ill effect, is that of rendering the terms of obtaining 
money so much the worse for many whose circumstances are 
such that they are not altogether precluded from obtaining it, 



16 

at some rate. Those who cannot borrow, may get what they 
want, so long as they have anything to sell. But, while out of 
loving kindness, or other motive, the law precludes a man from 
horrowing, upon terms too disadvantageous, it does not forbid 
him from selling at any, even the most ruinous rates. 

Everybody knows that forced sales are attended with loss : 
and to this loss an amount of Interest, w^hich would at first seem 
exorbitant, Avould bear but a small proportion. 

When a man's goods are taken, and sold under an execution, 
it is considered a good sale if the net amount reaches two-thirds 
what it would take to replace them again. In this way the 
kindness of the law, costs him directly 33J per cent, at least ; 
supposing, what is seldom the case, that no more property was 
taken then just enough to satisfy the claim. Now, if he had 
been permitted to hire the money at, say 12 per cent, per annum 
it would require nearly three years for the same amount to 
accrue, as interest, while the probabilities are that he would be 
able to pay oif the whole debt long before the expiration of that 
period. 

To the laws prohibiting Usury, too, we may look, as the prime 
cause of the establishment, and the strongest supporter of that 
branch of business, which is ordinarily looked upon as so dis- 
reputable, and at whose door are laid so many and grevious 
complaints of oppression, &c., viz : pawn-broking : — a business 
based only on the unsatisfied wants and necessities of that 
very class for Avhose protection from imposition such laws are 
made. 

So we might multiply cases and arguments, but perhaps 
sufficient has already been said to lead those who think, to the 
conclusion that is embodied in our proposition : viz: that every 
man ought to have the same right to buy and sell money at a 
profit, as he has to do so with merchandise or other property. 





Established, 1^44. Incorporated, lo§S 



S4-. 



